California Attorney General Xavier Becerra and the California Air Resources Board (CARB), together with the United States Department of Justice and Environmental Protection Agency, announced today [Jan. 10, 2019] a joint settlement valued at more than $500 million with Fiat Chrysler Automobiles N.V. and related companies (Fiat Chrysler). The settlement resolves allegations that the company violated environmental and consumer protection laws by using “defeat device software” to circumvent emissions testing. California will receive $78.4 million as part of the settlement. Fiat Chrysler is accused of installing the defeat device software in 100,000 vehicles nationwide and 13,325 vehicles in California. The affected vehicles are 2014-2016 diesel Jeep Grand Cherokees and Dodge Ram 1500s.

“California’s emission standards exist to protect our residents and the environment from harmful pollution,” said Attorney General Becerra. “Fiat Chrysler tried to evade these standards by installing software to cheat emissions testing. The company not only violated the law and our trust, but did so at the expense of our environment. With this settlement, we are holding Fiat Chrysler accountable and securing important funds for environmental protection efforts.”

“This settlement is a direct result of the enhanced screening and testing procedures CARB developed to uncover the Volkswagen diesel cheating scandal,” said CARB Chair Mary D. Nichols. “It is a testament to our ongoing commitment to clean the air – and a warning to other car manufacturers – that the vehicles they sell must meet the rules and vehicle standards expressly designed to protect public health.”

California’s $78.4 million recovery includes $45.8 million in penalties for violations of environmental laws and a mitigation payment of $19.035 million. These payments will be deposited into the Air Pollution Control Fund and managed by CARB through the budget process to fully mitigate the excess nitrogen oxide emissions from the affected vehicles. The settlement also includes a $13.5 million payment to the California Attorney General’s Office for violations of the Unfair Competition Law, other statutes, and costs. The extended warranty negotiated as part of the government settlement will cost Fiat Chrysler approximately $105 million. It also requires Fiat Chrysler to establish a recall program offering consumers an approved emission modification with an extended warranty to bring the vehicles into emissions compliance. The settlement requires Fiat Chrysler to conduct ongoing testing of emissions compliance, durability, and the vehicles’ diagnostics systems. The company must also enact corporate reforms and undergo ongoing independent compliance monitoring. Fiat Chrysler estimates that the cost of research and development for the approved emissions modification, installing the approved emissions modification, and implementing the federal mitigation program will be between $60 million and $80 million. Additionally, a related class action settlement filed today provides approximately $300 million in consumer relief.

The settlement is subject to court approval.

Background

The settlement resolves allegations that Fiat Chrysler installed software in certain diesel vehicles that would cause nitrogen oxide emissions from vehicles to be within legal limits during emission testing, but to exceed legal limits during ordinary operation.

These exceedances were detected in a joint effort by U.S. Environmental Protection Agency (EPA) and CARB using enhanced screening and testing procedures originally developed during testing of Volkswagen light-duty diesel vehicles. Shortly after revelations of excess emissions by Volkswagen in September, 2015 all manufacturers of light-duty diesel vehicles were informed that these new testing methods would be employed to identify defeat devices.

Following the Volkswagen emission cheating scandal, CARB and the U.S. Environmental Protection Agency (EPA) performed enhanced screening on diesel vehicles sold by all manufacturers. As a result of investigations using the new testing procedures, the agencies alleged that diesel 2014-2016 Jeep Grand Cherokee and Ram 1500s contained defeat devices. California’s complaint alleges that, in addition to misleading regulators and violating environmental laws, Fiat Chrysler’s use of the defeat device software and marketing of the vehicles violated California consumer protection laws. The vehicles were marketed to consumers as environmentally friendly, meeting or exceeding California’s emissions rules, and providing best in class fuel economy and driving range.

CARB’s mission is to promote and protect public health, welfare, and ecological resources through effective reduction of air pollutants and addressing climate change while recognizing and considering effects on the economy. CARB oversees all air pollution control efforts in California to attain and maintain health based air quality standards.

Evaluation and Development control room in the EPA’s Motor Vehicle Test Center in Ann Arbor, Michigan in 1973